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Like Warren Buffett, I do my best to avoid the airline sector. One of the main reasons Buffett prefers to stay away from investing in airlines has to do with the large capital costs that go into the business and the small margins (if anything) that the business and subsequently shareholders get in return.

Buffett is completely right. These high costs are exactly what have caused more than 100 airline bankruptcies since 1990 and are the primary reason that all national airlines have declared bankruptcy within the past decade.

As I've surmised on multiple occasions, Allegiant's older fleet significantly reduced its upfront costs, allowing it greater flexibility to undercut national carriers on price and attract consumers. Unlike national carriers, it also has the flexibility to discontinue flying certain routes if they become unprofitable. It has the perfect formula for success in the airline sector and that's the main reason why Allegiant was chosen as one of my "small caps to rule them all" last year.

Last night, Allegiant added one more chapter to its superiority when it reported fourth-quarter and full-year results. Shockingly, Allegiant only met Wall Street's EPS estimates ($0.56) but did slightly surpass revenue forecasts ($193.9 million vs. $192.4 million). But don't let the fact that Allegiant didn't crush EPS estimates fool you; this was another strong quarter.

Allegiant was able to pass along a $10-per-passenger increase in fares that helped it grow revenue by 20% with just a 9.3% increase in capacity. Passenger revenue per available seat mile (PRASM), probably the most important bottom-line metric to determining an airline's health, jumped by 11.7% over the year-ago period and 19.2% for the entirety of 2011. Just look at Allegiant compared to some of the national airlines -- mercifully, I'll leave American Airlines off this list:

Allegiant not only surpassed these national carriers, it did so while increasing capacity as many of the national carriers, like Delta and US Airways, reduced capacity. This should have made PRASM comparisons even better for the national carriers, but just went to show just how superior Allegiant is compared to everyone else in the sector.

Rising fuel and maintenance costs on Allegiant's older fleet are the only two concerns that persist, though all airlines will share these concerns. For the fourth quarter, fuel costs rose $9 per passenger and engine maintenance costs jumped 45%. Thankfully, third-party revenue jumped 23% and non-fuel-related costs dropped 2%, which kept these higher expenses well under control.

Allegiant has plans in 2012 of adding capacity and new routes, and likely adding to its rapidly growing third-party revenue stream. It continues to grow shareholder equity and more than doubled its ending cash balance over the year-ago period. With the company forecasting PRASM growth of 9%-11% in January and 1%-3% in the first quarter of 2012, I am more than willing to once again pledge my allegiance to Allegiant as the best airline of the bunch -- period!

What's your take on Allegiant? Is it worth the gamble in an otherwise terrible sector or would you avoid airlines no matter what? Share your thoughts in the comments section below.

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At the time this
article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He has also been known to pledge allegiance to the Detroit Lions. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Allegiant Travel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that flies above its peers.